a. Prepare a cash budget for January, February, March, and the quarter in total. 

b. Determine the budgeted ending balance of retained earnings as of March 31, 2022. Show all workings.

  

Transcribed Image Text:

Bell Inc. is a distributor of computer monitors. Julie, the chief controller of Bell Inc., is preparing a master budget for the first quarter of 2022. Below are the accounting records of the last quarter of 2021: Year-Month Sales October 2021 November 2021 $540,000 $600,000 $400,000 December 2021 The selling price was $50 per unit. The cost of goods sold was 60% of sales. The net income after tax was $212,500. The balance of accounts payable as of December 31, 2021 was $70,650. The balance of retained eamings as of December 31, 2021 was $1,560,400. Julie predicts sales in January, February, and March of 2022 to be $420,000, $480,000, and $540,000, respectively. She also estimates that sales in April and May of 2022 will be 500 units higher than the prior month and sales in June of 2022 will drop by 1,500 units. All sales are on account. The collection pattern remains the same as in prior years: 50% collected in the month of sale, 40% collected in the first month following the sale, and the remaining collected in the second month following the sale. In prior years, Bell Inc. used to keep 15% of the next month's sales as ending inventory. Starting from 2022, Bell Inc. plans to maintain 10% of the next two months' sales as ending inventory, since the product market demand will likely experience abnormal fluctuations in the post-pandemic period. Bell Inc. has renewed the purchase agreement with its long-term supplier, Mountain View Corp., which will continue to sell computer monitors to Bell Inc. in 2022. As stated in the renewed agreement, Bell Inc. will pay Mountain View Corp. 80% in the month following the purchase and the remaining in the second month following the purchase. Given the rising labor cost, Mountain View Corp. will charge 25% more on each monitor sold. As a result, Bell Inc. plans to increase its selling price by 20%. Operating expenses in the first quarter of 2022 are estimated to be the following (warehouse rent and insurance will be pre-paid at the beginning of the quarter and other expenses will be paid in the month incurred except for depreciation): Bell Inc. is a distributor of computer monitors. Julie, the chief controller of Bell Inc., is preparing a master budget for the first quarter of 2022. Below are the accounting records of the last quarter of 2021: Year-Month Sales October 2021 November 2021 $540,000 $600,000 $400,000 December 2021 The selling price was $50 per unit. The cost of goods sold was 60% of sales. The net income after tax was $212,500. The balance of accounts payable as of December 31, 2021 was $70,650. The balance of retained eamings as of December 31, 2021 was $1,560,400. Julie predicts sales in January, February, and March of 2022 to be $420,000, $480,000, and $540,000, respectively. She also estimates that sales in April and May of 2022 will be 500 units higher than the prior month and sales in June of 2022 will drop by 1,500 units. All sales are on account. The collection pattern remains the same as in prior years: 50% collected in the month of sale, 40% collected in the first month following the sale, and the remaining collected in the second month following the sale. In prior years, Bell Inc. used to keep 15% of the next month's sales as ending inventory. Starting from 2022, Bell Inc. plans to maintain 10% of the next two months' sales as ending inventory, since the product market demand will likely experience abnormal fluctuations in the post-pandemic period. Bell Inc. has renewed the purchase agreement with its long-term supplier, Mountain View Corp., which will continue to sell computer monitors to Bell Inc. in 2022. As stated in the renewed agreement, Bell Inc. will pay Mountain View Corp. 80% in the month following the purchase and the remaining in the second month following the purchase. Given the rising labor cost, Mountain View Corp. will charge 25% more on each monitor sold. As a result, Bell Inc. plans to increase its selling price by 20%. Operating expenses in the first quarter of 2022 are estimated to be the following (warehouse rent and insurance will be pre-paid at the beginning of the quarter and other expenses will be paid in the month incurred except for depreciation):

Answer rating: 100% (QA)

Solution 1 Cash Budget January 420000 February 480000 March Total sale 540000 32400 270000 192000 ... View the full answer